On Friday, China’s State Council released a statement calling for higher down payments for second homes in cities and demanding both the collection of taxes on secondary sales and the enforcement of existing property curbs. The document, capping Premier Wen Jiabao’s three-year campaign to cool the housing sector, comes at a time when both Beijing’s National Bureau of Statistics and private surveys show an acceleration of residential prices across China.

Prices in China’s 100 largest cities rose 2.5% in February year-on-year, according to a private survey conducted by China Real Estate System, a consultancy. That was up from January’s 1.2% pace. February was the third-straight month of year-on-year increases and the ninth-straight month of month-on-month price growth. Home inflation in February was especially pronounced in the top 10 cities, where prices jumped 4.3% from the previous February.

The National Bureau of Statistics reports that residential prices rose 6.8% in 2011 and 7.7% in 2012.

Home prices have been increasing since the beginning of last decade and especially since 2009, when Premier Wen pumped too much stimulus into the economy. Housing prices, not surprisingly, soared about 20% that year as money, which could not be used productively, was diverted for speculative purposes. There was a sharp correction in late 2011, but the People’s Bank of China, the central bank, started another bull run in the middle of last year when it added even more liquidity to the economy.

As a result, homes are now beyond the reach of all but the wealthy. And economists think the problem will get worse. A Reuters poll shows that economists think prices will rise 7% this year.

Mr. Wen is just days from stepping down as premier, to be replaced by Li Keqiang at the National People’s Congress meeting, which starts Tuesday. So all eyes will be on Li as he develops his housing plan for the coming years.

A fair number of real estate analysts don’t believe there is much of a problem. “I think government officials will not describe home prices as ‘unreasonable’ in this year’s meetings,” said Zhang Hongwei of Tospur, a real estate consultancy, referring to the concurrent meetings in Beijing of the National People’s Congress and the Chinese People’s Political Consultative Conference. “Home price growth is actually in line with the country’s recovering economy.”

And to the extent there is an issue, many think it can be solved with another building campaign. Said the oft-quoted Lu Ting of Bank of America Merrill Lynch, “With the push of urbanization, new leaders could choose to focus on increasing home supply rather than curbing demand to seek the final solution to the property market.”

The country’s urban population is projected to increase 200 million this decade. This translates into a need for about 10 million residential units each year as migrants move to the cities and as buildings age and need to be replaced. Mark Williams of Capital Economics in London, writing in the official China Daily, points out that this structural demand is about the same as the housing stock of the United Kingdom, France, and Germany combined.

China’s developers can easily meet this demand. Builders, Williams points out, put up 11 million units in 2012, “the sector’s most difficult year on record.” If they continue to increase completions at the current rate, they will be finishing 19 million units a year in five years. That, however, is well in excess of even optimistically projected demand. “Barring some unforeseen surge in the pace of urbanization, that would leave a colossal glut of housing that could only be sold if prices collapsed,” he wrote.

The problem is actually worse than Williams suggests. The projected increase of urban population is unlikely to materialize because the country’s workforce has already leveled off—that occurred in 2010—and total population will do so in a few years—almost certainly before 2020. Farmers who have wanted to move to the great cities have, by and large, already done so.

Beijing’s predicament is that developers are building the wrong type of housing. China needs homes for the poor and middle class. Chinese officials, to their credit, already plan to build, during the current 12th five-year plan, 36 million units of “affordable housing.” In fact, Li Keqiang has been in charge of this subsidy program.

Yet the central government’s affordable housing program is proving to be a disappointment, failing on almost all criteria. There is, unfortunately, little prospect that the program can be made a success during the current five-year plan, which ends in 2015.

Private developers will not build low-cost housing in the absence of subsidies, and local governments are generally in a precarious financial condition. Beijing has yet to publish a figure for local debt for last year, but it could be as much as 17.5 trillion yuan, the recent estimate of Roubini Global Economics.

The bubble in Chinese housing, therefore, is not found at the bottom of the market. It’s at the top. When official media endorses the view that housing is “on a wildly unsustainable path,” we can be sure there is a gigantic problem lurking there. Almost no analyst sees home prices falling this year. At the end of 2012, however, there was about 236 million square meters of home supply on the market, about three times the volume of monthly sales. That’s manageable perhaps, but the real warning sign is that unsold apartments, as measured by floor space, increased 40% last year.

The residential sector can fall fast pulled down by top-end units. The rich buy apartments and often leave them empty, treating them as a store of value. It’s not uncommon to find a single owner with as many as 20 vacant flats. When the underlying economy erodes—as it is showing signs of doing now—owners will dump units either to raise cash or to avoid taking even bigger losses. Most unsold apartments are in smaller urban areas, which is where a panic could start.

Analysts like to say “China is different.” Yet we hear a variation of this line just before every economic collapse. Beijing’s technocrats can postpone a reckoning, but they have not repealed the laws of economics. There will be a crash.